Intel: Under the smoke and mirrors

The contrast between what Intel was saying and doing at its annual analyst meeting was pretty revealing.

SAN JOSE – The contrast between what Intel was saying and doing at its annual analyst meeting here yesterday was pretty revealing.

The context was clear: Analysts think Intel's PC franchise is starting to look like a pair of worn disco pants at a Web 2.0 party where ARM smartphones and tablets are the latest fashion. Intel execs fought the characterization on many fronts. But their actions spoke louder than their words.

I heard Intel execs repeatedly claim they can design a processor as low in power consumption as anything in the ARM world. Yet the big news from the event was about how Intel was going to increase its focus on low power design, implying execs thought the company needs to do better.

Intel's Dadi Perlmutter did show a chart that—without any hard numbers—suggested Intel's 32nm Atom-based Medfield smartphone processor is about as good as any 40nm chip out today in milliwatt-level power consumption. But so far the chip has been rejected by Nokia, and Intel lacks the confidence to share the names of anyone who might be committed to using it.

One OEM told me Medfield is too power hungry. He called for a new ground-up x86 design beyond the scope of an Atom shrink.

Intel execs also crowed about how Intel has become a software powerhouse, giving it an edge over ARM-based competitors. Yet the reference design for smartphones and tablets it trotted out ran Gingerbread, last year's version of Google's Android environment. A port to the superhot Honeycomb software is still in the works, and MeeGo—Intel's version of mobile Linux—was a footnote in the proceedings.

With 9,000 software engineers, Intel is now the world's third largest software company, execs said. I suspect it is at least fourth behind Google, Microsoft and IBM. In any case a third of those Intel engineers are working on antivirus and other security software in the new McAfee subsidiary, a big factor in how you view the numbers.

I also heard plenty of chest beating from Intel about how vibrant the PC market is with big growth in relatively small emerging markets like Venezuela and moderate growth in mid-sized markets like Mexico and Russia.

The slides Intel put up did not show the lackluster numbers in major markets like Western Europe, Japan and the U.S. Overall the company still estimates the PC TAM will grow 14 percent worldwide over the next several years. But it did admit its estimate will get a haircut down to 11 percent if tablets are as big as some predict.

I am beginning to sense some denial here. Let's not even talk about the FUD Intel is starting to spread on Windows on ARM.

The chart on the left told a more accurate tail. Quarterly sales of Intel's PC client division appears pretty clearly to be peaking. The image would be even more clear if Intel showed a longer swath of the group's financial history.